Commercial Matters - leases, buying & selling of businesses

 The first step in a lease is to check whether it is covered by the Retail Leases Act. If so, there are a number of formal documents to be signed as well as information brochures provided to the tenant. In the Retail Leases Act, the legal costs for the preparation of a lease are met by the landlord.

The issues that are relevant to all leases include:

• Shop description: Folio identifier, address, size, whether there is a car parking space, the condition of lessor fixtures and fittings e.g. lighting, separate electricity box, floor coverings, toilet facilities for staff and clients.
• Length of lease: The commencement and end date of the lease including option periods
• Rent: How much is the rent, whether rent includes all outgoings, whether there is a rent free period, what is the annual rent review procedure
• Suitability of the shop: Whether your business in the shop meets the permissible use by the Council, whether there are any outstanding health and building notices by Council, whether there are any restrictions on external advertising space on the building
• Outgoings: The full costs of outgoings that the tenant needs to pay.
• Bond or security deposit required and whether this is invested with the Retail Tenancy Unit
• Who repairs and who maintains the property and equipment
• Access to property – whether the tenant has 24 hours access. Core trading hours, when shops must be open for business.

 There would be additional Shopping centre requirements. The Landlord needs to provide:

• Annual sales of the centre
• Turnover for specialty shops per square metre using at least three categories (food, non-food and services)
• Centre traffic count
• Details of fitout construction standards
• Details of when the leases for major tenants end.

 To purchase a business you need to check:

• with your accountant as to the best business structure for the running of the business e.g. as sole trader, partnership, company, or trust structure etc.
• a detailed sale of business contract which includes business name/s, internet services, web-site, inventory, depreciation schedule, lease, and franchise agreements (if applicable);
• the current lease requirements to ensure that they are financially manageable;
• whether you can obtain the landlord’s consent for the transfer of the lease or for a new lease to you
• you can obtain all necessary licenses to run the business;
• with the Local Council for permissible use of the premises for your business and also whether you need to provide a development application for your business renovations
• whether the Vendor will provide a training period for you to run the business prior to settlement and after settlement of the purchase
• whether you wish to employ any of the current staffing and if so whether you would be liable for any leave entitlements or long service leave for staff.

In particular, check the financial records and profitability of the business, and where possible compare with other similar type businesses for sale. Check the business financial records with your accountant to consider whether the business is viable and also being sold at a fair price.

You should work in the business for a few weeks to check business turnover and operating issues.